Tax Return Preparation and CPA Malpractice Insurance
Its a fact that errors and omissions in preparing tax returns can happen and is perhaps a certified public accountants worst nightmare. A certified public accountant (CPA) might make any number of unintentional mistakes, such as entering a number incorrectly, or misinterpreting a law. When a mistake is detected and an IRS audit occurs, as is likely the case, the CPA will have to own any error that they may have committed. Any litigation that ensues on the part of the client will require CPA malpractice insurance to help pay for defense and any associated costs.
The client will be upset over the fact that theyre being audited, and thats certainly to be expected. In some instances, the client might merely need to file an amended tax return and the issue will be resolved. But if the problem is indeed more complex than that, and not so easily rectified, the CPA may be sued for a negligent act. By acknowledging that malpractice has been committed, the CPA risks added damage to his or her reputation.
CPAS have an ethical obligation
Whenever a tax preparer recognizes a mistake that he or she has made they need to call it to their client’s attention immediately. In such cases things could possibly be smoothed over quickly and easily. Hopefully they have a client that understandings that everything possible is being done in their best interest, and the matter will come to a close without incident. In some cases however, the mistake may complicate matters, and the client may suffer fines or penalties for the error that was made.
CPAs and other preparers have an ethical duty with respect to any errors and omissions resulting from the work they submit. Some mistakes are going to have a much greater impact on their clients and this can result in the potential for malpractice exposures, which can lead to possible legal defenses.
Taxpayers have a legal duty within any applicable statute of limitations to pay the correct tax upon discovering an error or omission that was made in the filing of their taxes. A taxpayer should file an amended tax return and simply pay any tax due. Accountants should carry cpa malpractice insurance to aid them whenever they make costly errors on tax preparations that affect their clients.